Study Tools

Measuring the Economy 1

Introduction and Summary

Gross Domestic Product (GDP)

Terms

Base year
-
The year from which constant prices or quantities are taken in calculations of
such indices as real GDP and CPI.

Bureau of Labor Statistics
-
The government organization responsible for regularly gathering data about the economic
status of the population.

Consumer price index (CPI)
-
A cost of living index that measures the total cost of goods and services
purchased by a typical consumer within a country.

Fixed basket
-
A set group of goods and services whose quantities do not change over time.
This is used, for instance, in the calculation of the CPI.

Gross domestic product (GDP)
-
The sum of the market values of all final goods and services produced within a
particular country during a period of time.

Gross domestic product deflator (GDP deflator)
-
The ratio of nominal GDP to real GDP for a given year minus 1. The GDP
deflator shows how much of the change in the GDP from a base year is reliant on
changes in the price level.

Gross domestic product per capita (GDP per capita)
-
GDP divided by the number of people in the population. This
measure
describes what portion of the GDP an average individual gets.

Gross national product (GNP)
-
An alternative measure of economic activity to GDP. GNP is the
sum of the
market values of all goods and services produced by the citizens of a country
regardless of their physical location.

Nominal gross domestic product (nominal GDP)
-
The sum value of goods and services produced in a country and valued at current
prices.

Real gross domestic product (real GDP)
-
The sum value of goods and services produced in a country and valued at constant
prices, calibrated from some base year. Real GDP frees year-to-year
comparisons of output from the effects of changes in the price level.

Formulae

Gross Domestic Product

GDP = [(quantity of A X price of A) + (quantity of B X price of B) + ... +
(quantity of N X price of N)] for every good and service produced within the
country